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Exercise 6 (Basic Net Present Value and Internal Rate of Return Analysis) (Ignore income taxes.) Consider each case below independently. 1. Edward Company's required rate of return is 15%. The company can purchase a new machine at a cost of P40,350. The new machine would generate cash inflows of P15,000 per year and have a four-year life with no salvage value. Compute the machine's net present value. Is the machine an acceptable investment? Explain. 2. Isabella Products, Inc., is investigating the purchase of a new grinding machine that has a projected life of 15 years. It is estimated that the machine will save P20,000 per year in cash operating costs. What is the machine's internal rate of return if it costs P111,500 new? 3. Nessie Press has just purchased a new trimming machine that cost P14,125. The machine is expected to save P2,500 per year in cash operating costs and to have a 10-year life. Compute the machine's internal rate of return. If the company's required rate of return is 16%, did it make a wise investment? Explain.

Exercise 6 (Basic Net Present Value and Internal Rate of Return Analysis) (Ignore income taxes.) Consider each case below independently. 1. Edward Company's required rate of return is 15%. The company can purchase a new machine at a cost of P40,350. The new machine would generate cash inflows of P15,000 per year and have a four-year life with no salvage value. Compute the machine's net present value. Is the machine an acceptable investment? Explain. 2. Isabella Products, Inc., is investigating the purchase of a new grinding machine that has a projected life of 15 years. It is estimated that the machine will save P20,000 per year in cash operating costs. What is the machine's internal rate of return if it costs P111,500 new? 3. Nessie Press has just purchased a new trimming machine that cost P14,125. The machine is expected to save P2,500 per year in cash operating costs and to have a 10-year life. Compute the machine's internal rate of return. If the company's required rate of return is 16%, did it make a wise investment? Explain.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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machine that has a projected life of 15 years. It is estimated that the P14,125. The machine is expected to save P2,500 per year in cash Exercise 6 (Basic Net Present Value and Internal Rate of Return Analysis) (Ignore income taxes.) Consider each case below independently. 1. Edward Company's required rate of return is 15%. The company can purchase a new machine at a cost of P40,350. The new machine would generate cash inflows of P15,000 per year and have a four-year life with no salvage value. Compute the machine's net present value. Is the machine an acceptable investment? Explain. 2. Isabella Products, Inc., is investigating the purchase of a new grinding machine that has a projected Tife of 15 years. It is estimated that the machine will save P20,000 per year in cash operating costs. What is the machine's internal rate of return if it costs P111,500 new? 3. Nessie Press has just purchased a new trimming machine that cost P14 125. The machine is expected to save P2,500 per year in cash operating costs and to have a 10-year life. Compute the machine's internal rate of return. If the company's required rate of return is 16%, did it moke a wise investment? Explain.
Transcribed Image Text:machine that has a projected life of 15 years. It is estimated that the P14,125. The machine is expected to save P2,500 per year in cash Exercise 6 (Basic Net Present Value and Internal Rate of Return Analysis) (Ignore income taxes.) Consider each case below independently. 1. Edward Company's required rate of return is 15%. The company can purchase a new machine at a cost of P40,350. The new machine would generate cash inflows of P15,000 per year and have a four-year life with no salvage value. Compute the machine's net present value. Is the machine an acceptable investment? Explain. 2. Isabella Products, Inc., is investigating the purchase of a new grinding machine that has a projected Tife of 15 years. It is estimated that the machine will save P20,000 per year in cash operating costs. What is the machine's internal rate of return if it costs P111,500 new? 3. Nessie Press has just purchased a new trimming machine that cost P14 125. The machine is expected to save P2,500 per year in cash operating costs and to have a 10-year life. Compute the machine's internal rate of return. If the company's required rate of return is 16%, did it moke a wise investment? Explain.
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